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The Government today warned Argentina not to doubt its "determination" to protect the Falklands after a decision to ban ships flying the flag of the Falkland Islands from Argentina, Brazil and Uruguay.
The measure was adopted at a meeting of the the South American trading bloc, Mercosur, in the Uruguayan capital, Montevideo.
The Foreign Office said it was "very concerned" by the "latest Argentine attempt to isolate" the islands and is now in "urgent" discussions with countries in the region.
There are 25 boats - most of them fishing vessels - flying the Falklands flag.
The dispute involves a vast area of potentially mineral-rich South Atlantic waters and has created a fresh diplomatic headache for Britain, which controls the islands.
Uruguayan president Jose Mujica said solidarity among South America's neighbours was key to his country's foreign policy.
He added: "For the moment, this means accepting that this territory is a colonial British position in our America."
Mr Mujica said British-flagged civilian ships that may supply the islands would be allowed to use its ports, but not military vessels.
Argentina's foreign minister Hector Timerman, whose country claims the Falklands as its own territory, thanked him for taking the position.
The Mercosur decision is the latest in a series by Latin American regional bodies designed to show solidarity with Argentina, which calls the islands Las Malvinas.
Roger Spink, president of the Falklands Chamber of Commerce, said they were a small community and felt increasingly under blockade.
He told the BBC: "If we were Palestine, the European Union would be up in arms."
Last week Uruguay said it was banning ships flying the Falkland Islands flag from its ports, prompting the Foreign Office to call on Uruguay's ambassador in London to explain the move.
In a statement to Forces News, the Foreign and Commonwealth Office said: ""We are very concerned by this latest Argentine attempt to isolate the Falkland Islands people and damage their livelihoods, for which there is no justification.
"It is not immediately clear what practical impact, if any, this statement will have, which mirrors the language already used by the Union of South American Nations (UNASUR) in 2010. We are discussing this urgently with countries in the region.
"But no one should doubt our determination to protect the Falkland Islanders' right to determine their own political future."
Former Foreign Office minister Denis MacShane said the move was aimed at London and blamed the coalition for weakening Britain's international standing.
The Labour MP said: "This hostile action is aimed at London not the Falklands.
"South American leaders know that Britain has fewer friends than ever before because of David Cameron's isolationist approach in Europe and the indifference to the Obama administration as most cabinet members are close to US neo-Cons.
"Brazil and other countries know that thanks to Liam Fox's defence cuts the UK no longer has aircraft carrier capability so British maritime power projection has been fatally weakened by the Government."
UKIP defence spokesman Godfrey Bloom said: "The Foreign Office needs to move on this quickly as it is obvious that we cannot rely on (EU foreign policy chief) Cathy Ashton and the EU's foreign service to protect the interests of the Falklands or indeed Britain.
"Negotiations are currently under way between Mercosur and the EU over trade agreements. These negotiations should be frozen immediately until this provocative ban is dropped."
Shadow foreign minister John Spellar said: "While this looks like a bit of a flag-waving gesture, Argentina should be in no doubt of the united determination of all parties in the United Kingdom to protect the Falkland Islanders' right to determine their own future."
Will is one of our reporters in the UK, specialising in business and technology stories.
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